By Michael T. Foley and Leonard Licht on March 15, 2019 Posted in Broker-DealerThe Financial Industry Regulatory Authority (FINRA) recently released a regulatory notice requesting comment on the effectiveness and efficiency of Rule 4370 (Business Continuity Plans and Emergency Contact Information). The comment period expires April 26. Rule 4370 requires a member firm to create, maintain, annually review and update upon any material change a written business continuity… Continue Reading

By Susan Light and Leonard Licht on March 15, 2019 Posted in Broker-DealerThe Board of Governors of the Financial Industry Regulatory Authority (FINRA) met on February 28 and March 1 in Boca Raton, Florida, where it discussed the organization’s finances, reviewed several significant technology and other capital initiatives, and considered certain rulemaking items.… Continue Reading

By Janet M. Angstadt and Michael T. Foley on March 8, 2019 Posted in Broker-DealerOn March 8, US Securities and Exchange Commission chairman Jay Clayton and director, Division of Trading and Markets Brett Redfearn gave a speech entitled “Equity Market Structure 2019: Looking Back & Moving Forward.” Chairman Clayton, who noted that their comments were their own and not necessarily those of the SEC or its staff, opined that… Continue Reading

By Michael T. Foley and Gregory A. Uffner on March 8, 2019 Posted in Broker-DealerThe US Securities and Exchange Commission has begun looking into whether the current multi-tiered pricing system used by stock exchanges favors large brokers and traders at the expense of small ones. In an effort to increase the volume of trading on an exchange, certain exchange operators (including New York Stock Exchange-owner Intercontinental Exchange Inc., Nasdaq… Continue Reading

By Michael T. Foley and Gregory A. Uffner on March 8, 2019 Posted in Broker-DealerThe Financial Industry Regulatory Authority has extended the deadline for member firms to self-report violations under the 529 Plan Share Class Initiative to April 30. The extension will allow firms to have more time to review their supervisory systems and procedures with respect to their 529 plan transactions. A more detailed discussion of the Plan… Continue Reading

By Michael T. Foley, Gregory A. Uffner and Leonard Licht on March 8, 2019 Posted in Broker-DealerThe Financial Industry Regulatory Authority’s Office of the Chief Economist has released a working paper (Study), maintaining that institutional orders routed by brokers that send a high percentage of such orders through affiliated alternative trading systems (ATSs) tend to receive lower order fill rates and higher execution costs. The Study examined order-handling information over the… Continue Reading

By Michael T. Foley and Stanley V. Polit on February 22, 2019 Posted in Broker-DealerOn February 13, the Financial Industry Regulatory Authority (FINRA) published an information notice alerting member firms about a suspicious email received by compliance personnel at a number of member firms. The email, sent by a purported BSA-AML compliance officer at a credit union, describes an attempted transfer of money from a firm client that the… Continue Reading

By Janet M. Angstadt and Stanley V. Polit on February 22, 2019 Posted in Broker-DealerOn February 12, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-05 (Notice) informing member firms that the effective date for the implementation of the amendments to FINRA Rule 4210 has been postponed. The amendments, which will establish mandatory margin requirements for certain covered agency transactions, will go into effect on March 25, 2020… Continue Reading

By Guy C. Dempsey Jr. on February 1, 2019 Posted in Broker-DealerThe Financial Industry Regulatory Authority is filing a rule change (SR-FINRA-2019-005) with the Securities and Exchange Commission that postpones until March 25, 2020 the implementation of mandatory margin for Covered Agency Transactions under FINRA Rule 4210.… Continue Reading

By Michael T. Foley, Susan Light and Leonard Licht on January 18, 2019 Posted in Broker-DealerOn January 15, the Securities and Exchange Commission announced charges against nine defendants, alleging their participation in a previously disclosed scheme to hack into the SEC’s EDGAR system and extract nonpublic information to use for illegal trading. The SEC charged a Ukrainian hacker, six individual traders in California, Ukraine and Russia, and two entities. In… Continue Reading

By Michael T. Foley, Susan Light and Leonard Licht on January 18, 2019 Posted in Broker-DealerOn January 8, the Financial Industry Regulatory Authority issued a Notice advising its members of updates to the Supplemental Statement of Income (SSOI). The updates are designed to conform with amendments adopted by the Securities and Exchange Commission that simplify and update certain FOCUS reporting requirements applicable to broker-dealers. Pursuant to FINRA Rule 4524, the… Continue Reading

By Michael T. Foley, Leonard Licht and Susan Light on January 18, 2019 Posted in Broker-DealerOn January 9, the Financial Industry Regulatory Authority issued a Notice to remind its members that they should not report auction transactions in US Treasury securities—including auction awards to either direct or indirect bidders—to the Trade Reporting and Compliance Engine (TRACE), as these transactions are excluded from the TRACE reporting requirements under FINRA Rule 6730(e)(8).… Continue Reading

By Michael T. Foley and Timothy D. Nolan on January 4, 2019 Posted in Broker-DealerOn December 20, the Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission announced its 2019 examination priorities. This year, OCIE’s examination priorities are divided into six categories: examining compliance and risk in registrants responsible for critical market infrastructure; protecting retail investors, including seniors and those saving for retirement; continuing oversight… Continue Reading

By Michael T. Foley and Timothy D. Nolan on January 4, 2019 Posted in Broker-DealerOn December 20, the Financial Industry Regulatory Authority filed a proposed rule change with the Securities and Exchange Commission to amend various FINRA Code of Arbitration Procedure Rules that govern objections in arbitration proceedings to subpoenas, orders of appearance of witnesses and production of documents by non-parties. Since non-parties to a FINRA arbitration do not… Continue Reading

By Michael T. Foley and Laura N. Krcmaric on December 21, 2018 Posted in Broker-DealerOn December 19, the US Securities and Exchange Commission announced that it had voted to conduct a Transaction Fee Pilot in national market system (NMS) stocks, following a recommendation from the Equity Market Structure Advisory Committee. The SEC is initiating the Pilot to study the effects of exchange transaction fee and rebate pricing models on… Continue Reading

By Kevin M. Foley, Leonard Licht and Gregory A. Uffner on December 14, 2018 Posted in Broker-DealerThis month, the Financial Industry Regulatory Authority (FINRA) issued a report summarizing various findings from recent examinations of its member firms (Report). In particular, the Report sets forth selected observations from recent examinations that FINRA considers worth highlighting because of their potential significance, frequency and impact on investors and the markets. The Report also describes… Continue Reading

By Michael T. Foley and Timothy D. Nolan on December 7, 2018 Posted in Broker-DealerOn November 28, the Financial Industry Regulatory Authority filed a proposed change to Rule 4512(a)(3) (Customer Account Information) with the Securities and Exchange Commission. FINRA Rule 4512(a)(3) currently requires member firms to obtain the “wet” signature of each named, natural person authorized to exercise discretion in an account. Members have stated that the requirement to… Continue Reading

By Michael T. Foley and Timothy D. Nolan on December 7, 2018 Posted in Broker-DealerThe Nasdaq Stock Market LLC (Nasdaq) has filed a proposed change to Nasdaq Rule 4756(c)(2) with the Securities and Exchange Commission. Rule 4756(c)(2) provides that, for each security listed on Nasdaq, the aggregate size of all quotes and orders at the best price to buy and sell will be transmitted for display to the appropriate… Continue Reading

By Michael T. Foley and Timothy D. Nolan on December 7, 2018 Posted in Broker-DealerOn November 30, the Securities and Exchange Commission adopted new Rule 139b under the Securities Act of 1933. Rule 139 currently provides a safe harbor for the publication or distribution of research reports concerning one or more issuers by a broker-dealer participating in a registered offering of a covered issuer’s securities. However, Rule 139’s safe… Continue Reading

By Michael T. Foley and Stanley V. Polit on November 16, 2018 Posted in Broker-DealerOn November 9, the Securities and Exchange Commission approved a new supplement (Supplement) to the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD), published by the Options Clearing Corporation (OCC). The ODD provides general disclosures regarding the characteristics and risks of exchange traded options. Generally, broker-dealers must provide a… Continue Reading

By Michael T. Foley and Timothy D. Kertland on November 16, 2018 Posted in Broker-DealerOn November 2, the Securities and Exchange Commission adopted amendments to Rule 606 of Regulation NMS in order to require broker-dealers to provide certain individualized disclosures to customers with respect to the firm’s handling and execution of orders. This disclosure would only be required upon the request of a customer in connection with certain orders… Continue Reading

By Gregory A. Uffner and Michael T. Foley on September 28, 2018 Posted in Broker-DealerOn September 24, the Financial Industry Regulatory Authority (FINRA) issued a Regulatory Notice (Notice) reminding firms of their applicable obligations when publishing a quote in an OTC security, in addition to filing a Form 211. Securities Exchange Act of 1934 (SEA) Rule 15c2-11 prevents a broker-dealer from initiating quotations in an OTC security unless such… Continue Reading